Cyprus is expected to remove the restrictions on the withdrawal of nonresidents’ deposits from the island in a move that would induce depositors to withdraw most of their money, Lebanese banking sources said Tuesday.

“The Cypriot central bank sent an email and a memo to all foreign banks operating in the country which states that foreign depositors will be allowed soon to withdraw their money from the banks in the island without any restrictions imposed,” a leading banker told The Daily Star.

He added that if this measure was taken then many Lebanese depositors would be encouraged to deposit all or most of their cash in Lebanese banks.

Some banks say the memo allowing foreign depositors to withdraw their money will be issued very soon but declined to set a specific date.

The report leaked to The Daily Star could not be independently confirmed, but some banks believe that Cyprus would be committing a major blunder if it allowed foreign citizens to withdraw most or all of their money from the cash-strapped island.

“If this is true then Cyprus will be committing a major mistake. We did not get any confirmation so far from the central bank in the island to remove the ceiling on the withdrawal of cash from the banks,” another banker told The Daily Star.

All of the bankers interviewed by The Daily Star stressed they would not advise their clients what to do with their money in Cyprus.

“It is up to our clients. If they want to withdraw their money from Cyprus then we will be glad to help. But I believe that most of them will prefer to pull out their money and transfer it to Lebanon,” one banker explained.

According to sources, one of the top banks in Lebanon has close to $1 billion in deposits in its branches in Cyprus.

They added that many Lebanese depositors moved their money to Cyprus before the financial crisis because the taxes on interest rates and net profits were lower than Lebanon.

“Cyprus was an attractive place. A safe haven where the yields were high and taxes very low. But when the financial crisis erupted, many investors feared that their assets in the island may be under threat,” one banker said.

Most Lebanese banks if not all have avoided buying Cypriot bonds becausethey feared that the country could default in the payment of its dues.

The transfer of deposits to Lebanon will not necessarily mean that Lebanese banks will prosper or make more money out of it.

“Of course we will accommodate these deposits if they come to Lebanon. But we won’t offer higher returns on deposits than the rates we are offering now,” one banker said.

He emphasized that Lebanese banks were flush with liquidity, adding that more cash did not mean banks would generate higher revenue.

Bankers argue that finding investment opportunities for the extra cash in Lebanon bewilders all of the top lenders and experts, who have already been struggling to invest money in money generating projects.

“For this reason, the Lebanese banks snapped up all or most of the $1.1 billion Eurobond which was issued by the Finance Ministry two days ago. Eurobonds are still one of the favoriteinstruments of investment,” a banker said.

Most of the banks assured The Daily Star that they would stay in Cyprus despite the current financial crisis, although they confided that they believed the future of the island was no longer promising.

“We may reduce our presence in Cyprus, but we will not close down in the near future. We will monitor the situation very closely before making any move,” a bank manager said.